EMI vs Unapproved Options Calculator 2026/27
Enter the option terms and exit value. The tool compares the employee tax cost and the company National Insurance cost across EMI, unapproved options and growth shares at 2026/27 rates. All outputs are general guidance; speak to a specialist before granting or exercising options.
EMI vs Unapproved Options Calculator 2026/27
Enter the option terms and exit value. The tool compares the employee tax cost and the company National Insurance cost across EMI, unapproved options and growth shares at 2026/27 rates. All outputs are general guidance; speak to a specialist before granting or exercising options.
The agreed actual market value per share (or per the whole grant) at the date of grant. Used as the EMI base cost and the growth-share starting point.
What the employee pays to exercise. For a clean EMI grant, this equals AMV. If below AMV, EMI still produces an income tax charge on the discount.
Value of the shares at sale or exit. Unapproved column assumes exercise and sale happen together (cashless exercise). For EMI, this is the disposal proceeds.
Sets the income tax rate on the unapproved exercise charge and the CGT band for growth shares.
The amount paid for growth shares at acquisition (usually a low hope-value). Defaults to 0. A s.431 election within 14 days is needed to lock in this base cost.
Unapproved column assumes exercise at exit (cashless); income tax applies on the full gain at exercise and post-exercise CGT is nil. Employee NIC on unapproved options is an estimate based on the standalone gain: it ignores existing salary already occupying the NIC bands. Employer NIC of £15,000 is modelled as a flat 15% of the option gain; the £5,000 secondary threshold is annual/per-employee, not per-grant, and is not deducted here. Growth shares require a s.431 election within 14 days of acquisition and an HMRC-agreed valuation. BADR is not automatically available on growth shares or unapproved options (BADR covers EMI shares specifically). These figures are general guidance only; qualifying-company questions and actual grant structuring require specialist advice.
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EMI vs unapproved options vs growth shares: the tax difference explained
Enterprise Management Incentives (EMI) are the most tax-efficient option route for qualifying UK startups. There is no income tax at grant and no income tax at exercise provided the exercise price equals or exceeds the actual market value agreed with HMRC at grant. The gain from exercise price to exit is subject only to Capital Gains Tax, and if the shares are held for two years from grant, Business Asset Disposal Relief applies at 18% with no need to pass the 5% personal-company test. The company also pays no employer NIC on a clean EMI exercise, because there is no employment income charge.
Unapproved options receive no HMRC approval. Under general employment-related-securities rules, the difference between market value and exercise price is charged to income tax and employee NIC at exercise, as employment income. The company also pays employer NIC at 15% on the same amount. For a higher-rate taxpayer this means a 40% income tax charge plus employee NIC versus an 18% CGT charge under EMI: a substantial difference on the same economic gain.
Growth shares are shares rather than options, usually in a new class that only participates in exit proceeds above a hurdle. They are acquired up front at a low hope-value; with a section 431 election made within 14 days, the employee is taxed on the unrestricted market value at acquisition (often very low) and future growth to exit is CGT rather than income tax. Standard CGT rates apply (18%/24%), not the EMI-specific BADR treatment. Growth shares need an HMRC-agreed valuation and the s.431 election to work correctly.
The calculator models the unapproved column under the cashless-exercise assumption (exercise and sale happen together). In practice, unapproved options exercised before exit would produce income tax at exercise on the then-market-value, with further CGT on any later gain. The headline comparison holds directionally but the exact split differs with timing.
Frequently asked questions
What is the BADR rate on EMI gains from 6 April 2026?
18% on qualifying gains up to the £1m lifetime limit. EMI shares qualify for BADR under the two-year holding rule from grant without needing to pass the 5% personal-company test that applies to other shares.
Do EMI options qualify for Business Asset Disposal Relief?
Yes, provided the shares are held for two years from the date of grant. The 5% personal-company test that normally applies to BADR is waived for EMI shares. The company and the options must still qualify under the EMI rules.
What is the tax on unapproved options at exercise?
Income tax at the employee's marginal rate on the difference between market value and exercise price, plus employee NIC under the primary Class 1 rules (8% between £12,570 and £50,270, 2% above). The company also pays employer NIC at 15% on the same amount.
What is employer NIC on unapproved options?
15% of the option gain (the amount charged to income tax at exercise). This is a company cost, not an employee cost. A clean EMI exercise at AMV is not earnings, so no employer NIC arises on EMI.
What are growth shares and how are they taxed?
Growth shares are a new class of shares that only participate in exit proceeds above a hurdle value. With a section 431 election within 14 days of acquisition, income tax at acquisition is charged on the low hope-value; subsequent growth to exit is taxed as CGT at 18% or 24% depending on the taxpayer's rate band. BADR does not apply automatically to growth shares.
What is a section 431 election?
A joint election under section 431 ITEPA 2003 on restricted securities (including growth shares). It must be made within 14 days of acquiring the shares. It elects for income tax at acquisition to be charged on the unrestricted market value, locking in CGT treatment for future growth. Missing the 14-day window is a classic funded-startup trap.
Which is cheaper for the company, EMI or unapproved options?
EMI is almost always cheaper for the company. On a clean EMI exercise (exercise price at AMV), no employer NIC arises. On an unapproved option exercise, the company pays 15% employer NIC on the full gain. On a £100,000 gain that is £15,000 of company cash.
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